High metal prices don’t equal more demand: BMO

Metals demand in the global industrial economy has been soft since November, despite rising prices across most metals over the past year and manufacturing expansion at its highest level since May 2024.

More than half of major developed and emerging economies showed manufacturing expansion at the end of 2025, BMO Capital Markets noted on Thursday. That was likely driven mostly by monetary easing in several western economies, and more certainty on United States tariffs after the U.S.-China trade deal in November.

“That said, this is not yet translating into metal demand, with study group data suggesting sluggish demand for Chinese crude steel, copper, and zinc in November and December,” BMO Capital Markets commodities analyst Helen Amos said in a note.

Metals demand remains tepid because metals purchasing by end users hasn’t followed an uptick in manufacturing, and Chinese construction – a key source of steel and base metals consumption – has been declining. Meanwhile, metal prices are high due to tight supplies and not from strong demand.

The bank’s analysis is in line with its previous assessment in late 2024, when it lowered its metal demand estimates for 2025 due to anticipated higher tariffs just before U.S. President Donald Trump’s inauguration and global trade difficulties.

Metals prices up

While sluggish metals demand risks a slowdown in economic growth, iron ore prices gained 4% to $106 per tonne during 2025 and until Thursday, Copper rose about 50% to $5.89 per lb. – the highest point since 2011 – and zinc grew about 15% to $1.52 per pound.

Though PMIs (purchasing manager indexes) are expanding in economies outside of North America, that could be pushed mainly by new orders and falling import costs while buying is more moderate, Amos said.

That comes through to a degree in metal demand, with Chinese crude steel’s consumption at low levels and flat steel margins negative into this year. Construction in China contracted in general last year and 2025 was the sixth consecutive year of declining floor starts and the second consecutive year of declining completions.

Autos revving up

However, the auto sector stood out for its return to strong activity last year, with light-vehicle sales reaching about 91.7 million units, according to S&P Global Mobility. That marked the highest annual number since 2019 when 89.9 million units were sold, and could indicate the end of a period defined by the pandemic and supply chain disruptions.

Electric vehicles are still a strong growth driver in that segment, with total EV sales up 20% to 20.7 million units, according to Benchmark Minerals.

With the global automotive sector being the second-largest global source of metal demand by tonnage (behind Chinese construction), renewed auto sales growth potential is likely to emerge as a major trend this year, Amos said.